Another
late self-employed tax return highlighted
a couple of interesting "grey"
areas in our taxation laws. Many
women are involved in direct sales
of clothing as a self-employed business.
These companies require that the
operator purchase not just sample
stock, but to highlight the new
fashions, it is suggested that accessories
are purchased to accentuate the
fashion lines.

This
makes perfect sense to me-a show
home sells better filled with the
appropriate furniture just as a
store displays clothing with the
appropriate accessories. These businesses
operate by women having in-home
clothing parties, and accessorizing
the clothing is an important and
integral part of making sales. We
all appreciate the difference that
scarves, jewelry and shoes make
to an outfit.

On
talking to the controller of a large
company and then talking to our
friendly tax department, the results
of the discussions is that there
are grey areas that are not exactly
defined through our tax laws. This
is one of them. To claim these accessories
as a tax deduction-and the operators
have to purchase these items if
they are doing their job properly-the
final onus is upon the operators
to prove to the tax department how
much they are used for business.

The
direct sales bulletin states that
"some clothing may be tax deductible".
Very wishy-washy guidelines that
can't be further defined. According
to the representative at the tax
department, if an audit should happen,
the operator has to prove that these
accessories are used only for business.
How does one prove that they did
or didn't slip on that gorgeous
pair of earrings to go out for a
non-business dinner?

The
safest way, as suggested by the
company controller in Ontario, is
to take a percentage off the deduction
for "personal use". They
have told their operators to keep
claims "fair and reasonable"-so
that voids the claim for the diamond
necklace. It was suggested that
a 50 percent personal usage amount
be deducted off the total for the
year. The tax department will live
with a personal deduction amount,
but don't forget, you still have
to prove this percentage of use.

The
other grey area that arose was conventions.
You can only deduct the expenses
pertaining to two conventions a
year, but how do you define between
conventions and conferences? Or
workshops, seminars and meetings,
particularly if they are out-of-town?
Do you call a convention a conference
or a workshop-or a fashion show?
The Canadian tax department had
no real answer except that "you
can only claim expenses for two
conventions a year".

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